Per the folks over at Daily Real Estate News mortgage rates are heading upwards. And while rates are STILL historically low, the increase in rates CAN affect your purchase power significantly.
How significantly, you ask?
Well, using some really round numbers, a couple with NO debt that makes $200,000 a year can afford a mortgage of about $780,000 at 4.5% interest. At 5% interest, the loan about is $745,000. And at 5.5%, the loan amount is $705,000. ALL of these amounts will cost you $4,000 per month.
So, remember, rates ARE at historical lows, and if they do go up, they are still expected to stay historically low (let’s not forget, the 1980’s saw double digit interest rates!!!)
But if you pass up a property because you are looking for a bargain, you may find that you can’t afford that bargain if interest rates creep up, even by 1/2 a percentage point.
Good luck and happy hunting! And if you need a great mortgage broker to provide you with advice on what you CAN afford, give Tim Higbee of Guarantee Mortgage a shout! He’s professional, honest, available and even does FHA loans.